Port Report: China’s coastal shipping begins to suffer from over-capacity

Port Report: China’s coastal shipping begins to suffer from over-capacity
Jim Wilson March 08, 2019 https://www.freightwaves.com/news/maritime/port-report-china-shipping-gl...

Dry bulk and container shipping along China coast seeing too much capacity, according to government statistics, leading to falling rates.

China’s domestic coastal shipping market is generally stable, according to a new report from the country’s Ministry of Transport, but there are increasing issues with over-capacity. The report looks at coastal dry bulk shipping, domestic wet bulk shipping, coastal box shipping and cross-Taiwan Strait trade.

Domestic dry bulk
Growth rates for the domestic maritime transport of coal, ore and grain have slowed, the report stated, adding that shipping capacity has increased. China had a total of 1,832 dry bulk carriers, each with a capacity of more than 10,000 metric tons, in its coastal trade and a total deadweight capacity of 62.5 million metric tons. Deadweight is a metric ton measure of the weight-carrying capacity of ships. (A metric ton is about 2,205 U.S. pounds.) Shipping capacity in China’s domestic dry bulk trades increased by 13.1 percent year-over-year. The tonnage of imported second-hand ships accounted for more than 40 percent of new capacity, the report stated. The Ministry anticipates that, in the coming year, the demand for dry bulk transport will slow down at the same time that a “large number” of ships enter the market.

Coastal wet bulk
Demand for coastal oil tanker transport declined while capacity increased, according to the report. The market was affected by the overhaul of marine oil terminals and the suspension of production in some refineries. Volumes of oil cargoes declined by 7 percent year-over-year, the report stated, to stand at 70. 4 million tons. By the end of 2018, China had 1,296 domestic oil tankers with a total capacity of 1.02 million deadweight, which the report described as a “slight increase in capacity.” In 2019, the overall demand for coastal oil transport in China is forecast to decline due to a reduction in the number of oil fields and the construction of domestic oil pipelines. Although domestic oil production is forecast to rise, the supply of vessel capacity is thought to be “generally sufficient.”

Demand for bulk liquid chemical transport is described as “stable,” capacity is in a slight “surplus” and the freight rate remains “stable.” China’s chemical production and consumption is said by the Ministry to be in a period of “low growth.” Domestic coastal transport of liquid chemicals reached 26.8 million tons, a year-over-year increase of 3.1 percent. The domestic coastal Chinese chemical-tanker fleet (which includes oil tankers, chem-tankers and dual purpose ships) stood at 288 ships that, together, have a deadweight of 1.12 million metric tons.

China’s liquefied gas carrier market experienced increased demand in 2018 but was otherwise “generally balanced.” By the end of 2018 there were 72 coastal liquefied gas carriers with a total deadweight of 247,900 metric tons. That might not sound like a lot, but when natural gas (methane) is cooled to minus 260 Fahrenheit it changes state into liquid and condenses to about 1/600th of its gas-phase volume.

China’s domestically carried LNG volumes in 2018 were described by the Ministry as “basically unchanged” since the previous year. Meanwhile, the capacity for the carriage of gases such as propylene and ethylene were described as “slightly tight.” The total 2018 volume of seaborne coastal liquefied gas transport was 3.23 million metric tons, up 3.8 percent compared to the previous year.

Looking forward to the current year, the Ministry noted that due to the commissioning of “large petrochemical base projects,” the demand for bulk liquid chemical and liquefied gas transport carriage has increased “but the growth rate is limited.” Ship capacity is expected to grow in line.

Domestic box shipping
China’s domestic box shipping industry saw the introduction of a large amount of extra capacity and freight rates are “generally falling.” In 2018 China’s domestic coastal box traffic increased year-over-year by just under 8 percent. By the end of 2018 there was a total of 252 vessels with a box-carrying capacity greater than 700 twenty-foot equivalent units (TEU); that fleet had a total capacity of about 716,000 TEU. The number of boxes carried increased by 18.3 percent. Demand for the carriage of cargoes, particularly coal and grain, remains strong but because of the introduction of new ships, the capacity situation has slackened further.

Looking forward to 2019, China’s Ministry of Transport envisages growth in the coastal box shipping trade, due to an increase in the domestic containerization rate, that will partially absorb excess ship capacity. However, the Ministry warns, excess capacity from the international box shipping trades could be redeployed into the domestic market.

Cross-Taiwan Strait Trade
There was a marginal increase in direct cargo volumes shipped across the strait. Volumes in 2018 stood at 50.22 million metric tons, a year-over-year increase of 0.5 percent. Bulk cargoes (unspecified) stood at 14.78 million tons, up 2 percent on the prior corresponding period. Bulk liquid chemical transport stood at 5.23 million tons, up 1.8 percent, and liquid petroleum gas products stood at 870,000 metric tons in 2018, which was up 7 percent on the previous year. Oil product volumes stood at 43,000 metric tons, which was up 26.1 percent on the previous year. Meanwhile, the cross-strait box traffic volume was 2.2 million TEU in 2018, a decrease of 2.1 percent from the previous year. The Ministry of Transport says that volumes were generally up in 2018 owing to cross-strait exchanges and cooperation. It predicts that the two-way cross-strait container trade volumes will further increase by up to 10 percent in 2019.